French Connection shares tumble as ailing fashion firm reveals falling sales and extends search for a buyer
- French Connection shares slumped 15% in early trading but recovered to stand 9% down on the day at 34.5p
- The company said its talks with prospective buyers are ‘ongoing’
- Sales tumbled by more than 12% in the first half of the year as it shut shops
French Connection saw its shares tumble this morning after the struggling fashion retailer said it was still looking for a new suitor.
The company, which put itself up for sale nearly a year ago, said today that talks with a number of interested parties were ‘ongoing’ as it extended the process until January.
The update came as French Connection revealed it had trimmed half-year losses to £4.7million, compared with £15.1million a year ago when it was stung by the collapse of House of Fraser.
French Connection sales tumbled by more than 12% to £51million in the first half of the year
However, sales tumbled by more than 12 per cent to £51million in the first half of the year as the retailer closed down under-performing shops in the face of rising property costs and volatile consumer confidence.
Shares fell by 15 per cent at one point but recovered to trade 9 per cent down at 34.5p.
The firm – once famed for its naughty FCUK slogan – shuttered 13 of its own stores and concessions, as well as 19 franchised and licensed outlets, leaving it with 90 and 185 respectively.
On a same-store basis, sales crept up by 1.4 per cent in the UK and Europe, marking a significant improvement on the 7 per cent slump it reported this time last year.
Last October, Stephen Marks – the group’s boss and chairman – said he wanted to sell off his 42 per cent stake in the company he founded nearly 50 years earlier.
After six years of losses, the company admitted it was ‘reviewing all strategic options in order to deliver maximum value for its shareholders, which includes the potential sale of the company’.
Another significant shareholder in the FTSE-listed firm is Mike Ashley’s Sports Direct, which owns a 27 per cent stake – not far off the 30 per cent needed to launch a takeover bid.
News of the sale last year triggered speculation that the acquisitive billionaire tycoon would throw his hat in the ring.
Ashley’s Sports Direct has since bought Game Digital, Jack Wills, Sofa.com and Evans Cycles. It has also seen its near 30-per cent stake in Debenhams wiped out after the department store chain fell into the hands of its lenders.
Commenting on the ongoing sale process today, French Connection said: ‘We believe that further time is required to bring the process to a successful conclusion.’
French Connection opened a new concept store with exclusive products, homewares and a coffee shop in London this summer
Marks added that French Connection’s turnaround efforts were paying off, but cautioned over ongoing ‘challenging’ trading.
‘There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although our retail performance has been resilient, overall the wholesale business is strong and we continue to see good stability in the licence income,’ he said.
‘The order books we have provide a clear outlook for the second half of the year in wholesale but it appears that retail conditions will continue to be challenging.’
Pippa Stephens from GlobalData ‘French Connection’s performance is doing little to assure prospective buyers of its future potential, however new ownership should allow for an essential revamp of its ranges and store estate to try to regain appeal among shoppers.
Stephens added that the retailer is ‘lagging behind other premium competitors like Whistles and Reiss’.
French Connection opened a new concept store with exclusive products, homewares and a coffee shop in London this summer.
In its last full year, it limped back into the black with a marginal profit of £100,000.